If you're running a business in South Carolina, there's one insurance requirement you can't afford to overlook: workers' compensation. Whether you're launching a startup, hiring your fourth employee, or managing a construction crew, understanding South Carolina's workers' comp laws isn't just about staying compliant—it's about protecting your business from potentially devastating financial consequences.
Here's the reality: the South Carolina Workers' Compensation Commission can fine you $100 per day for each employee if you're operating without coverage. For a business with 10 employees, that's $1,000 daily—adding up to $365,000 per year. And that's before we even talk about the medical bills and lost wages you'd owe if an employee gets injured. Let's break down exactly what you need to know.
Who Needs Workers' Compensation in South Carolina?
South Carolina has a straightforward threshold: if you regularly employ four or more employees, you must carry workers' compensation insurance. This includes part-time workers and family members on your payroll. Notice the word "regularly"—that means if you typically have four or more people working for you, even if they're not all full-time, you're required to have coverage.
There's also a payroll threshold: businesses with an annual payroll of less than $3,000 are exempt. But let's be honest—if you're paying employees in 2026, you're almost certainly exceeding that amount. At the federal minimum wage of $7.25 per hour, one full-time employee working 40 hours a week earns about $15,080 annually. So this exemption really only applies to businesses with minimal, occasional labor.
For 2025, the maximum weekly compensation rate is $1,134.43, meaning injured workers can receive up to this amount per week in benefits. The 2026 rate has been approved by the Workers' Compensation Commission, ensuring benefits keep pace with wage growth.
Who's Exempt from the Requirement?
South Carolina law carves out several exemptions, but don't assume you qualify without careful consideration. Here's who's exempt from the workers' comp requirement:
Sole proprietors are automatically excluded from workers' comp policies, though you can choose to opt into coverage by contacting your insurance carrier. Many sole proprietors do this for their own protection—if you're injured on the job, who's going to pay your medical bills and replace your income? Independent contractors are also not considered employees under workers' compensation laws, meaning they're responsible for their own insurance coverage.
But here's where it gets tricky: simply calling someone an independent contractor or paying them via 1099 doesn't make it so. South Carolina uses a fact-specific test to determine independent contractor status, looking at factors like who controls the work, who furnishes equipment, how payment is structured, and the right to fire. If you misclassify an employee as an independent contractor, you could be on the hook for coverage—and penalties—retroactively.
Other exemptions include casual employees, agricultural workers, state and county fair associations, railroads and railway express companies, and federal employees. Businesses with fewer than four employees are also exempt, unless they choose to opt in.
Special Rules for General Contractors and Nonprofits
If you're a general contractor, pay close attention: you're liable for your subcontractors' employees if they don't maintain their own workers' compensation coverage. That means if your subcontractor's worker gets injured on your job site and the subcontractor doesn't have insurance, you could be responsible for the claim. This is why smart general contractors always verify that their subs carry proper coverage and maintain certificates of insurance on file.
Nonprofit organizations don't get special treatment under South Carolina law. If your nonprofit employs four or more people, you're required to carry workers' compensation insurance, just like any for-profit business. The mission of your organization doesn't matter—the law treats all employers equally.
The Real Cost of Non-Compliance
Operating without required workers' compensation coverage isn't just illegal—it's financially catastrophic. The penalties start at $750 per year of noncompliance and max out at $1,000 per year. But that's just the baseline. Under South Carolina Code §42-5-40, employers can be fined $1 for each employee, but not less than $10 nor more than $100 for each day without coverage. That daily $100-per-employee fine adds up fast.
And it gets worse. The Workers' Compensation Commission has the authority to double any fines and penalties assessed for violations. They can also shut down your business immediately if you're operating without required coverage. Plus, the state can seize business assets to pay for costs associated with a workers' comp claim if you don't have insurance.
For professional employer organizations (PEOs), there's an even stiffer penalty: $1,000 per day for each non-assigned employee without coverage. The message from South Carolina is clear: workers' compensation isn't optional.
How to Get Coverage and Stay Compliant
Getting workers' compensation coverage in South Carolina is straightforward. You can purchase a policy through any commercial insurance carrier licensed to write workers' comp in the state. Shop around—rates vary significantly between carriers based on your industry, payroll, and claims history.
If you're having trouble finding coverage in the standard market—perhaps because you're in a high-risk industry or have a challenging claims history—you can obtain coverage through the state's assigned risk program, administered by the National Council on Compensation Insurance (NCCI). It's more expensive than the voluntary market, but it ensures you can meet your legal obligation.
Once you have coverage, you're required to post Form 2, Employer's Notice of Being Subject to the Act, publicly in your place of business. This notice informs employees that you carry workers' compensation insurance and explains their rights under the law. You can obtain this form from the South Carolina Workers' Compensation Commission website.
Keep detailed records of your coverage, including your policy declarations page and proof of premium payments. If the Commission ever asks for documentation, you want to be able to produce it immediately. And if your staffing levels change—especially if you drop below four employees—notify your carrier. You may be able to cancel your policy and get a refund for unused premium.
Workers' compensation isn't the most exciting part of running a business, but it's one of the most important. The right coverage protects your employees when they're injured and shields your business from financial ruin. And in South Carolina, where the penalties for non-compliance are steep and enforcement is serious, staying compliant isn't just smart—it's essential. If you're unsure whether you need coverage or how much to carry, talk to a licensed insurance agent who specializes in workers' compensation. The cost of getting it right is far lower than the cost of getting it wrong.
